Increasing evidence suggests a possible relationship between mesenchymal stem cells (MSCs) and sarcoma. MSCs are hypothesized to be the cells initiating sarcomagenesis, and cancer stem cells (CSCs) sharing features of MSCs have been identified in sarcomas. Here, we report on the characteristics of a bone marrow-derived rat mesenchymal stem cell line that spontaneously transformed in long-term culture. The rat transformed mesenchymal stem cells (rTMSCs) produced soft-tissue fibrosarcomas in immunocompromised mice and immunocompetent rats. In vitro, the rTMSCs displayed increased proliferation capacity compared to the untransformed cell line. The transformed MSCs maintained the mesenchymal phenotype by expression of the stem cell marker CD 90 and the lack of hematopoietic and endothelial markers. Cytogenetic analysis detected trisomy 6 in the rTMSCs. Side population (SP) isolation and tumorsphere cultivation of the transformed cells confirmed the presence of CSCs among the rTMSCs. Importantly, the rTMSCs retained their differentiation capacity towards osteogenic and adipogenic lineages. This transformed MSC-based cell line may be valuable in examining the balance in a mixed cell population between cancer stem cell properties and the ability to differentiate to specific non-transformed cell populations. Moreover, it may also be a useful tool to evaluate the efficacy of novel targeted immunotherapies in vivo.